How to Dissolve a Nonprofit Corporation in Nebraska

Find out how to go about dissolving a nonprofit corporation in your state.

Not all nonprofit corporations last forever. Among other
possibilities, a nonprofit corporation may close because it’s no longer
able to get necessary funding, the directors or members have
irreconcilable differences, or the organization simply decides that it
has met its goals and no longer needs to exist. Whatever the underlying
reason, if you choose to close down a Nebraska nonprofit corporation,
you’ll need to go through a process called dissolution.
Dissolution requires a vote or other formal authorization, the filing of
key documents with government agencies, and a group of other tasks
collectively known as winding up the corporation.

The
specific steps for closing a nonprofit organization will vary depending
on several basic facts. Bearing that in mind, this article is limited in
the following ways:

it only covers nonprofit corporations (not all nonprofits are incorporated)

it only covers nonprofits that have applied to the IRS and been approved specifically as 501(c)(3) tax-exempt organizations (not all nonprofits are exempt from paying taxes, and not all tax-exempt nonprofits are 501(c)(3) organizations)

it
only covers nonprofits designated as “public benefit corporations”
under Nebraska law (any Nebraska nonprofit that is a 501(c)(3)
organization is by definition a Nebraska “public benefit corporation”);
and

it only covers voluntary dissolution based on a
decision by the nonprofit’s directors and, where applicable, the
nonprofit’s members (an nonprofit may be involuntarily dissolved through
a court decree, or for administrative reasons such as failing to file a
biennial report or pay required fees).

Benefits of Formal Dissolution

Your
nonprofit corporation is registered with the State of Nebraska. Through
the dissolution process, you will officially cancel that registration
and officially end the corporation’s existence. For a nonprofit that’s
closing down, a properly-handled dissolution achieves at least two
important goals. First, it ultimately will put your organization beyond
the reach of creditors and other claimants. Second, it will allow you to
fulfill your legal obligations regarding the proper distribution of any
remaining corporation assets.

Authorizing Dissolution

The
procedure for authorizing dissolution will vary depending on whether,
in addition to a board of directors, your nonprofit corporation also has
members. (If you’re unsure of whether your nonprofit has
members, you should check your articles of incorporation, bylaws, or
similar organizational documents.)

if there are members, a vote of the directors and a vote of the members.

If
your nonprofit does not have members, it is up to the board to approve
dissolution. You should look to your articles of incorporation and
bylaws for specific rules and requirements regarding the board approval
process. (Generally, you will need a resolution to dissolve,
and dissolution must be approved by a majority of the directors in
office at the time of approval.) You must give at least two days’
advance notice of the meeting on dissolution to all directors. In
approving dissolution, the directors must also adopt a plan of dissolution
that indicates to whom the nonprofit’s assets will be distributed after
all creditors have been paid. Your board can also take action to
dissolve without a formal meeting if all board members sign a written
consent authorizing the dissolution.

If your nonprofit has voting members, the board first must approve a resolution to dissolve
the corporation and then submit it to the members. If the board wants
the dissolution to be approved by the members at a membership meeting,
members must be given at least 10 days’ advance notice; the notice must
include a copy or summary of the plan of dissolution. A
two-thirds majority of the members, or a majority of the membership
voting power, whichever is less, is required to approve the dissolution.
The board may also obtain approval from the members through written
consent or written ballot, in which case the material soliciting the
consent or ballot must contain a copy or summary of the plan of dissolution. Approval by written consent requires 80% of the members’ voting power.

The
NCA also allows for the possibility that your articles of incorporation
or bylaws require that dissolution be approved by people other than the
board or members. If your articles or bylaws do contain such a
provision, you will also need to obtain approval, in writing, from those
other people.

Make sure to properly record the board’s resolution
and plan of dissolution, the directors’ votes, and, where necessary,
the members’ votes. You’ll need this information for filings with the
state and the IRS.

Certain Matters are Unchanged by Dissolution

Among other things, dissolution alone does not:

transfer title of the nonprofit’s property

subject the nonprofit’s directors or officers to standards of conduct different from those that applied before dissolution

change
quorum or voting requirements for the nonprofit’s board or members,
change provisions for selection, resignation, or removal of the
nonprofit’s directors or officers or both, or change provisions for
amending the nonprofit’s bylaws

prevent commencement of a proceeding by or against the nonprofit in its corporate name

abate or suspend a proceeding pending by or against the nonprofit on the effective date of dissolution; or

terminate the authority of the nonprofit’s registered agent.

Initial Notice to Attorney General

You
must send written notice of your intention to dissolve to the Attorney
General (“AG”) at or before the time you submit articles of dissolution
to the Secretary of State (“SOS”). Your notice to the AG must include a
copy or summary of your plan of dissolution. In response to the notice,
the AG should provide written consent to your nonprofit that it can
proceed with dissolution. You are prohibited from transferring any of
your nonprofit’s assets until 20 days after you have given notice to the
AG, or before the AG provides its written consent, whichever is
earlier.

Articles of Dissolution

After your
board (and, where applicable, voting members) have approved the
dissolution, you’ll need to file articles of dissolution with the SOS.
(Strictly speaking, the NCA does not require you to file this document,
instead stating that a nonprofit “may” dissolve by filing the articles.
However, if you don’t file articles of dissolution, you won’t properly
complete the voluntary dissolution of your nonprofit organization.)

The articles of dissolution must contain:

the name of your nonprofit

the date dissolution was authorized

a statement that dissolution was approved by a sufficient vote of the board

if approval of members was not required, a statement to that effect

if
approval by members was required, (a) the designation, number of
memberships outstanding, number of votes entitled to be cast by each
class entitled to vote separately on dissolution, and number of votes of
each class indisputably voting on dissolution; and (b) either the total
number of votes cast for and against dissolution by each class entitled
to vote separately on dissolution or the total number of undisputed
votes cast for dissolution by each class and a statement that the number
cast for dissolution by each class was sufficient for approval by that
class

if approval of dissolution by some person or persons other
than the members or the board is required, a statement that the
approval was obtained; and

a statement that the nonprofit gave the required notice to the AG regarding the intention to dissolve and plan of dissolution.

The
SOS does not provide a form or template for the articles of
dissolution, so you will have to draft your own. There is a base fee of
$5 to file the articles, plus an additional fee of $5 per page. Also,
online filing is available through the state’s eDelivery system.

“Winding Up”

After
your nonprofit has formally authorized dissolution, it continues to
exist only for the purpose of taking care of certain final matters that,
collectively, are known as “winding up” the company. It may be
appropriate to designate one or more officers and/or directors to handle
these matters.

Under the NCA, the main winding up tasks are:

protecting the nonprofit’s assets and minimizing its liabilities

discharging the nonprofit’s liabilities and obligations

disposing of nonprofit properties that will not be distributed in kind

returning,
transferring, or conveying assets held by the nonprofit upon the
condition that they be returned in the event of dissolution

transferring the nonprofit’s assets as provided in the articles of incorporation or bylaws

if
no provision has been made in your nonprofit’s articles of
incorporation or bylaws for distribution of assets on dissolution,
transferring the nonprofit’s assets to one or more purposes described in
section 501(c)(3) of the Internal Revenue Code; and

doing every other act necessary to wind up and liquidate the nonprofit’s assets and affairs.

Generally speaking, distributions of assets are made only after
you have paid off all of your nonprofit’s liabilities and obligations.
If your nonprofit had certain items that were conditionally on loan to
it, those items must be returned to whoever loaned the them, according
to the terms of the loan. Finally, a dissolving 501(c)(3) organization
must distribute its remaining assets for tax-exempt purposes. In
practice, this generally means distributing those assets to one or more
other 501(c)(3) organizations. If you have any questions about how to
distribute assets upon dissolution, you should check with a lawyer.

Notice to Creditors and Other Claimants

One
other part of winding up your dissolved nonprofit involves giving
notice of its dissolution to creditors and other claimants. Giving
notice is optional. However, doing so will help limit your nonprofit’s
liability and allow it to more safely distribute its assets to other
nonprofit organizations.

Under the NCA, one way to give notice is
by sending a written document directly to known claimants after
dissolution. Proper written notice must:

describe information that must be included in a claim

provide a mailing address where a claim may be sent

state
the deadline, which may not be fewer than 120 days from the effective
date of the written notice, by which your dissolved nonprofit must
receive the claim; and

state that the claim will be barred if not received by the deadline.

You
also may give notice to unknown (potential) claimants by publishing in a
newspaper. As with sending direct notice to known claimants, there are
specific rules for giving notice through publication. Generally
speaking, claimants have five years after the date of newspaper
publication to bring a claim.

Some of the rules for giving notice
and responding to claims can be hard to understand. Therefore, if you
choose to give claimants notice, you should strongly consider getting
assistance from a business attorney.

Final Notice to the Attorney General

When
“all or substantially all” of your nonprofit’s assets have been
transferred following approval of dissolution, your board of directors
must deliver to the Attorney General a list showing who, other than
creditors, received those assets and what assets each person or entity
received.

Federal Tax Note

For federal tax purposes, you’ll need to file IRS Form 990 or IRS Form 990-EZ. You must include a completed Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets),
as well as copies of your articles of dissolution, resolution to
dissolve, and plan of dissolution. When completing Form 990 or Form
990-EZ, you’ll need to check the “Terminated” box in the header area on
Page 1 of the return. For additional, more specific guidance, check out Every Nonprofit’s Tax Guide, by Stephen Fishman (Nolo), go to the IRS website, or consult with a tax professional.

Additional Information

You can find additional information, such as forms, mailing addresses, phone numbers, and filing fees, on the SOS website.

Final Note: Dissolving
and winding up your nonprofit corporation is only one piece of the
process of closing your organization. For further, general guidance on
many of the other steps involved, check Nolo’s 20-point checklist for closing a business and the Nolo article on what you need to know about closing a business.